Category Archives: investment

State of the Market for the North Gwinnett HS Area

07Aug

Lane Bailey

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Real estate is local… and one of the biggest influences in real estate is the local schools. Great schools spur demand. Mediocre schools lag. People actively seek a way out of bad school districts. It isn’t the only thing that pushes value and demand, but it certainly is one of the big drivers.

Transportation, jobs and local amenities are also drivers. Depending on the type of buyers, things like hospitals may pull one demographic, while shopping and restaurants may pull in another.

In the case of the schools in the NGHS cluster (Roberts, Suwanee, Level Creek and Riverside Elementary; North Gwinnett Middle School and North Gwinnett High School), there is a draw from the quality of the schools. People WANT to be in this area to have access to these schools.

Because of that, we are seeing prices push up and inventories push down. In fact, when looking at the sales, the recent decreases look to be largely because there simply isn’t enough inventory to support more sales. So, while at first glance it may look like this area is slowing down, the problem is that there just isn’t any supply to allow a higher number of sales. The North Gwinnett Cluster consists of parts of Suwanee and a little bit of Sugar Hill.

Since schools are one of the big drivers of demand, MANY consumers search for real estate based on schools. Unfortunately, there are a lot of homes that are incorrectly entered, causing homes that are NOT in the cluster to land in the search results… and even throwing off the statistics, as homes outside of the correct area are included in statistical samples.

Working with an agent that lives and works in the area you are interested in helps to sort out some of the chaff… but even then I see a lot of agents that have been in the market area a long time kind of “forget” that several new schools opened 3 years ago… and that the alignment and attendance zones changed. One easy way to tell… any listing with North Gwinnett High School and Lanier Middle School together is wrong…

If you are interested in a home in the North Gwinnett Cluster, or if you want to sell your home in the North Gwinnett Cluster, give Lane a call…

Affordability… The Forgotten Aspect of Home Buying

In early June, 2013, the interest rates for home purchases were hovering around 3.5%. In July, those rates were hanging out at 4.5%.

Historical U.S. Prime Rates (Photo credit: Wikipedia)

There are two ways to look at that…

Mortgages jumped in expense drastically between those two points.

Looking at rates from a historical perspective, 4.5% is a screaming deal.

But in fact, there is a third, often overlooked aspect that needs to be addressed.

Rates are STILL expected to rise over the next few months and years.

As a home buyer in the market, assuming a housing payment budget of $1500/mo (for comparison, we’re just going to use PI… Principle and Interest… and not include Taxes and Insurance).

With a 3.5% interest rate, the buyer could get a loan of about $334,000.

With a 4.5% interest rate, it drops to about $296,000

When the rate rises to 5.5% (and it eventually will…), that loan amount will drop to about $264,000.

Buying berries (Photo credit: Wikipedia)

Seeing the difference between 3.5% and 5.5% means a drop in purchasing power of almost $70,000 with the same payment, it becomes painfully obvious that interest rates are at least as important as price when it comes to affordability.

Yet, many buyers will delay on the purchase, trying to find the right price, while the interest rates pushes properties out of their grasp that they COULD have purchased previously. Let’s not mistake… price IS important… but it is only part of the picture.

Looking forward

Looking forward at the real estate market, from late July, 2013, there are a variety of thoughts and opinions.

We are expecting a slow-down in closings for July, compared to the pace we saw in May and June. Granted, those were pretty active months. I would think that the lion’s share of the slow-down may be attributable to increased interest rates and housing costs. There was a HUGE bump at the end of June… rates jumped almost ¾% over one weekend.

Moving into August and September, I expect to see sales rebound somewhat. Interest rates WILL have an impact, but I think that we will also be seeing the wave of initial buyers subside. There was a tremendous pent-up demand… and there is still a significant number of buyers on the edge of entering the market… that dived in at the first signs of recovery.

As more buyers are able to sell their homes without injecting huge amounts of cash, and more buyers feel more secure abut their employment, they will look to move up or purchase.

Is it too late?

No… but it does require a different thought process than a year or two ago. Then, deals were everywhere. Buyers didn’t have to be quick, and they didn’t have to make competitive offers on most properties. But now, buyers NEED to be ready to offer when they see a property. They also need to be ready to start with their best offer… they might not have a second chance to offer on that property. Sellers are not required to send out a call for “Highest and Best” after getting multiple offers. Many don’t.

But in 3-5 years, when buyers are looking back on the opportunities they had today, they WILL see that there were great deals to be had. They just required more of a fight than they did when there were fewer buyers in the market and more properties available.

What is important to a Seller?

To begin with, keep in mind that each seller is a unique individual (or pair of unique individuals… or company with unique individuals overseeing sales of assets/homes). What tops the charts for one seller might hardly merit a mention with another.

Timing. This is huge for some sellers. As mentioned before, the longer the time between contract and closing, the more than can go wrong. And what sellers often worry about “going wrong” is that the buyer will simply back out. But there are also considerations that revolve around the cost of holding the house, like mortgage payments, utilities and maintenance. The seller has likely “disengaged” from this home and invested themselves in another. On the flip side, some sellers might need some time here because they still have to find a house. Offering a fast close, but stating that you are flexible and able to meet the seller’s needs may be a deal-maker.

Financing. First, there is NO excuse to not have a good pre-approval letter. OK, the one acceptable excuse is if you have a “proof of funds” letter and you’re paying cash. If you have the money for a larger down-payment, that might be the deal-maker for you. And at least explore alternative options to FHA and VA financing. FHA or VA may be your best bet… but KNOW they are instead of just assuming. And if you have the liquid cash to make the purchase, talk with your mortgage professional about the option of purchasing with cash and then doing a cash out refi.

Inspections. I expect that any of my buyers will want an inspection. However, if you REALLY know what you are doing, buying a house “as-is” instead of subject to an inspection or “due diligence” period can really set the mood for a better deal with the seller. There are dangers, but they might be offset by the savings.

Earnest Money. I almost always recommend that a buyer offer up 1% for earnest money ($1000 minimum). Offering up less just doesn’t seem as serious to me. While seldom do buyers lose it unless they do something egregious, it does look better to sellers.

Price. If you are deficient in one area, you may be able to make up for it in another. I know that isn’t the goal, but it is a reality. You aren’t going to get the best price, while at the same time getting the seller to accept a long closing, riskier lower down payment and loan type, long due diligence period and other non-monetary concessions.

So, let’s put on the Seller shoes…

Your house is on the market, listed at $250k. Sales have been moving along well in the neighborhood, and like almost all sellers, you think your house is “better than average”. Here are three offers to look at. Which one do you think is going to be the winner?

I’d love to get some comments as to which offer YOU like most and why.

5 steps to get YOUR offer to be the one that WINS

10Jul

Lane Bailey

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Be the winner…

A couple of years ago all of the strategies revolved around finding ways to get the lowest price out of a seller. Then, it morphed to finding the line where the bank would sell. Over the last few months, the next evolution has come…

Winning the bid.

Often we see good houses come on the market and go under contract in less than a day. These homes are often pulling in multiple offers, some considerably above the asking price. Yet, many buyers are still convinced that we are in a market that favors them. We aren’t… except for a few less desirable neighborhoods or some very high price points.

master_bedroom_2 (Photo credit: lane.bailey)

In order to actually buy a house, instead of just making offers, there are a few steps you can follow to “win the bid”.

Get a serious pre-approval. If your mortgage person isn’t pulling your credit and spending some time getting it, it probably isn’t worth getting. Sellers see an offer with a pre-approval as being MUCH more serious than one without.

Have a down payment. The larger the down payment, the more stable to buyer. Of course, this is going to vary depending on the buyer segment (1st time buyers usually don’t have 20% to put down… I understand that).

Cash is King and FHA is the Stable Boy. FHA loans are the toughest on sellers. Not only does the property need to appraise on value, but it has to meet specific criteria for condition. Most houses meet everything, but an old roof or a missing handrail can turn into anything from a headache to a nightmare for the seller (and the buyer). A cash sale, on the other hand, is pretty assured. Conventional loans fall somewhere in the middle… and VA are more rare, but slightly tougher than FHA on the seller.

Be ready to close ASAP. The longer the seller has to wait between an agreement and a closing date, the more that can go wrong and the more expenses that can get racked up. Aside from the seller’s house payments and utilities, there is lawn upkeep and maintenance on the house. Not only that, but if you are waiting 2 or 3 or 4 months to close, the seller may think you could develop a case of “cold feet” and change your mind.

Price heals all. We used to tell this to sellers… poor condition can be corrected with price. Much to their dismay, that “correction” was usually an over-correction. Now, the shoe is on the other foot. Buyers that have issues with some of the above conditions can “heal” their offers with price. But that “healing” is likely to involve a larger bump in the offer than one might think… Of course, in the end, it comes down to the seller and what is most important to them.

In next week’s post, we’ll look at 3 sample offers and compare them…

So, you want a Foreclosure…

26Jun

Lane Bailey

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I have been getting a lot of calls lately asking about foreclosures.

English: (Photo credit: Wikipedia)

Almost word for word, “I’m thinking of buying a foreclosure… what do you have for me?”

My reply is generally along the lines of “where were you last year… or the year before… or the year before?”

A year ago I was saying that the market was poised to turn. And that when it DID turn, it would be fast. It would be REALLY fast. Here we are. There is little inventory. Prices have shot up. Foreclosures are few and far between… hardly the controlling factor they were not that long ago. Short sales are no longer prevalent, although there are some hanging around.

A couple of years ago, you could make an offer on a foreclosed property… below the asking price… and have it be THE offer they had to look at. You were betting against the table, but only the table. A bit over a year ago, that started to change. Multiple offers started happening on the cream of the foreclosure crop. No, you were betting against the table and several other players… but usually the list price could win the day. In fact, it would usually more than win the day. We were begging buyers to get back in the market.

Now, bidding full price on a freshly listed property isn’t even close to a guarantee. In fact, some fo the nicer ones can go for considerably over the list. And the list isn’t all that hot to begin with.

All is not lost… There are still deals in some pockets. But the pockets are moving and the deals are fleeting. Right now, if you want to find a reasonable deal, you have to be ready to look FAST. And you have to be ready to make an offer just as quickly. You better have your financing in order as well.

Of course, you can wait until things calm down… but that might mean that a similar house costs 10-20% more. Interest rates might not be as nice, either.